Natural gas is trending higher inside a rising channel on the 1-hour time frame and is currently testing support. A bounce off this area could set off a climb back to the next upside targets marked by the Fibonacci extension tool.
The 38.2% level is around the mid-channel area of interest at $2.727 then the 50% level is near the $2.750 minor psychological mark. Stronger bullish momentum could take natural gas up to the 61.8% extension near the channel top at $2.771 or the 76.4% level near $2.800. The full extension is at $2.842.
The 100 SMA is above the 200 SMA to indicate that the path of least resistance is to the upside or that support is more likely to hold than to break. Price is also finding support at the 100 SMA dynamic inflection point that lines up with the channel bottom.
Stochastic is heading higher to show that bullish pressure is present, but the oscillator is nearing the overbought zone to signal exhaustion. Turning lower would mean that sellers are taking over and could push for a break below the channel support.
RSI has more room to climb higher, so buyers could stay in control for much longer.
The upcoming natural gas inventory report from the Department of Energy could determine whether support is likely to hold or break. A smaller build of 47 Bcf is eyed, following the earlier gain of 61 Bcf. This might signal that demand is still supported, even as temperatures are warming in some parts of the US.
However, a larger than expected increase in stockpiles could bring some downside pressure since this could indicate that purchases are starting to slow. A surprise draw, although unlikely, could mean a lot of upside for the commodity as it would show that supply levels are low while demand remains strong.